7/09/2009 @ 4:13PM

Stimulus Money May Finally Flow To Green Energy

It’s been a long time coming, but green energy business are about to get their promised boost from the economic stimulus package that President Obama signed into law in February.

Treasury Secretary Timothy Geithner on Thursday announced rules that will finally allow developers of wind, solar, biomass and other green energy projects to apply for a total of $3 billion in federal grants to cover upfront project costs. The funding, part of the American Recovery and Reinvestment Act, will be critical to boosting the fortunes of limping green industries like wind power, where total installations in 2009 will likely fall 40% below last year as a result of the broad economic downturn.

Large wind projects depended heavily on tax-equity investors during the wind power boom from 2006 to 2008. Institutional investors such as now-defunct
Lehman Brothers
, as well as
Goldman Sachs
paid for big clean energy projects in return for 30% federal tax credits. But damaged banks won’t be paying taxes for years to come and have abandoned the green energy business, leaving developers to look for new sources of investment.

Under Treasury Department guidelines, the Department of Energy will disburse cash grants worth 30% of upfront costs for projects that start construction by the end of 2010. The funds could make projects particularly attractive for developers of small- to medium-sized projects that can be financed via a company’s balance sheet, or by cash-rich utilities such as a
Florida Power and Light
, which through its NextEra Energy subsidiary is a leading developer of both wind and solar projects.

The grants could boost the fortunes of companies like turbine manufacturers
General Electric
, Vestas and
Siemens
, while solar module makers
SunPower
and
First Solar
could also gain business.

But the funding may do little to help independent developers of large projects that traditionally relied on tax-equity financing. Businesses will receive funding from the Treasury program two months after a project begins operation, meaning that companies will need bridge financing in some cases.

In 2006 the federal government provided $550 million in tax credits to 450 clean energy businesses. The stimulus grants could offer a stronger tail wind: The Treasury estimates that 5,000 renewable business will partake of its latest offering.